Save Article

Plenty of Ponzis

I watched as he pleaded for mercy in Denver District Court, but the damage was done. He'd fleeced the Mile High City's elite, including football great
John Elway,
and many not-so-elite, out of more than $70 million.

Mr. Mueller, 42 years old, did this with one of the oldest tricks around: A classic Ponzi scheme, taking money from new investors to pay off the old. He touted an amazing, risk-free stock-trading strategy until April, when he sent his investors an email saying he was sorry he blew it. He was then intercepted by police while considering a jump from a parking garage.

On the same day Mr. Mueller faced his day of reckoning, the U.S. Department of Justice announced results of its most recent crackdown on financial fraudsters called "Operation Broken Trust."

Since Aug. 16, the effort has rounded up 343 criminal defendants and 189 civil defendants, many accused of running schemes similar to Mr. Mueller's. The department tallied 120,000 victims and $10.3 billion in losses.

"Cheating investors out of their earnings and savings is no longer a safe business plan," said U.S. Attorney General
Eric Holder.

So running a Ponzi used to be a safe business plan? That would explain why there have been so many.

Bernie Madoff
stole most of the headlines with a multibillion-dollar swindle that could make Charlie Ponzi, the famed con artist of the early 1900s, drool with envy. But there've been penny-ante Ponzis just about everywhere.

You know, $10 million here, $50 million there. Many of them get only a brief in a local newspaper, aren't a matter for the Feds and don't generate loud complaints from victims.

The characters, the settings and the dramas differ, but Ponzis are all the same. Someone gains trust, promises profits that are too good to be true and fabricates statements. The money is then either blown in desperate trades or on mansions, cars, planes, art and jewelry.

When shrinks prepare psychological profiles for courts, the indicted are often described as "delusional," "narcissistic," "antisocial" or "sociopathic."

Without a suit and a Rolex, they might have turned out to be
Jeffrey Dahmer.
But put them in an arena where self-aggrandizing and hypercompetitive behavior is rewarded, and they could be CEOs or U.S. senators.

One target of the Fed's latest roundup was Nevin Shapiro, CEO of Capital Investments USA. He pleaded guilty on Sept. 15 to running an $880 million Ponzi scheme.

He told investors their money was going into a wholesale grocery distribution business. Instead, it went to pay for gambling debts, floor seats at the NBA's Miami Heat games, a yacht, a Miami Beach residence and donations to the University of Miami, which may have helped Mr. Shapiro delude himself into thinking, "Hey, I'm not such a bad guy after all."

Why do people keep falling for these sorry characters after Charlie Ponzi pulled his frauds a century ago?

Colorado Securities Commissioner
Fred Joseph,
who has handled his share of Ponzis, puts it this way: "People want to believe."